E-Retailers’ Appetite for Payments Hikes PayPal, Checkout Acceptance

It's not yet four months old, but already Google Inc.'s Checkout Internet payment service is making an impact, with 7% of online retailers surveyed in recent weeks by CyberSource Corp. having adopted it. That compares with 35% for PayPal, 24% for e-checks and other automated clearing house debits, and 16% for I4Commerce Inc.'s Bill Me Later product, among other alternatives to credit and signature debit cards. The data from CyberSource also indicate a major upswing this year in the number of payment methods online merchants are accepting. With credit and debit cards, along with some overseas methods, counted in the mix, these retailers are taking on average 3.5 payment methods, up from 2.1 in 2005. The largest merchants have gone from 2.6 payment types to 4.7, the data show. This is “a pretty big increase in one year,” says Doug Schwegman, director of customer and market intelligence at CyberSource. Driving the sharp increase are equally dramatic surges in adoption of specific payment alternatives. PayPal's rate is up from 23% in 2005, for example, while Bill Me Later a year ago was supported by 9% of responding merchants. ACH, on the other hand, is relatively static, having increased from a 21% adoption rate in 2005. Also, gift cards continue to win acceptance online, with some 23% of merchants now accepting the highly popular prepaid plastic, up from 19% last year. In many cases, CyberSource says, merchants are accepting more payment types to close more online deals. Completed transactions are 14% higher, the company says, for merchants accepting three or more payment methods instead one or two. Interestingly, Google Checkout seems to be skewing so far toward larger merchants. CyberSource's survey shows 14% of retailers with annual online revenues of $25 million or greater had adopted the search giant's payment service, introduced in June. By contrast, Checkout's adoption rate among merchants in the $5 million-to-$25-million range is 4%, and among merchants smaller than $5 million, 6%. This result may mirror the rate of usage among merchants of Google's AdWords marketing service, which is closely tied to Checkout. PayPal, often seen as Checkout's rival, enjoys a 44% adoption rate among the smallest merchants, with 20% of the mid-range retailers and 29% of the largest merchants accepting it. Mountain View, Calif.-based CyberSource, which provides online transaction-gateway and fraud-management services, closed its data collection only last week, a spokesman says. The survey results will be included in a larger report the company does annually on Internet fraud, set for release in November. Some 316 online merchants responded to the question concerning number of payment types supported.